Watching the Web: Dyn Goes Big With $50M Growth Round

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In one of the year’s largest funding rounds for New England tech, Dyn said today it has raised $50 million in new growth financing.

The deal says a lot about where the Manchester, NH-based company is heading, along with the world of Internet traffic and performance monitoring—particularly in an era of increasingly complex IT tools and cyber threats.

The new money comes from Pamplona Capital Management, a private equity and hedge fund investment firm based in London and New York. The deal represents the firm’s first investment from a new tech-focused fund, based in Boston; it’s led by Justin Perreault, a Boston-area partner who was previously with Commonwealth Capital Ventures. Perreault has taken a seat on Dyn’s board.

The round is officially a Series B, following a $38 million Series A round that Dyn raised in 2012. The company was bootstrapped for a decade before raising outside funding from North Bridge Venture Partners to speed up its growth. Dyn has now taken in about $100 million in total funding, says co-founder and CEO Jeremy Hitchcock. (He declined to reveal the company’s valuation, so it’s hard to know how much of a stake Pamplona has in Dyn, but it’s probably significant.)

Dyn has grown to 400-plus employees—up from 170 in 2012—and says it has made 10 acquisitions over its lifetime, most of them in the past five years. The most recent were Nettica in managed Domain Name System (DNS) services—Dyn’s core business over most of its years—and Renesys in Internet traffic monitoring.

The company has been positioning itself as more than an Internet traffic controller. Its services sit on top of cloud providers such as Amazon Web Services and content delivery networks like Akamai, as well as other online infrastructure. So it tries to help customers see the root causes of their Web traffic problems and outages—whether a site is down, for example, or whether Internet paths for traffic to get there are disrupted.

What this means is that Dyn has increasing visibility into the fundamental flow of information online. Armed with advanced tools and capabilities, Hitchcock says, “we can basically fix the Internet in real time.”

Sounds like a lofty goal. But it’s one that everyone is interested in getting a piece of—from companies wanting to track how their customers, partners, and vendors are accessing their sites (think Netflix users in different countries), to international banks dealing with data sovereignty issues, to intelligence agencies tracking cyber crooks and responding to security incidents.

One example that Dyn observed last year: Internet traffic that normally flows between a U.K. nuclear regulatory entity and a U.S. research site in Texas was being routed through other Western European countries and Ukraine (see map below). “That was not a desired outcome,” Hitchcock says. “They could be sniffing traffic along the way, or there could be trade secrets” compromised through such a “route hijacking.” British Telecom, whose customers include the U.K. nuclear agency, could use Dyn’s software to monitor the situation and, presumably, alert the agency.

But it’s hard to tell what’s malicious and what’s a mistake. Compared to managing physical security in a corporate setting, Hitchcock says, “when you move to the Internet, it’s a completely different game and you lose control over what’s happening.” He adds that corporations “see a hall of mirrors as [they] try to unravel what’s happening online,” and that “law enforcement and intelligence [agencies] are certainly interested in this.”

While Dyn’s core business is selling better website performance and management, it’s clear that the underlying technology overlaps with the growing concerns of cybersecurity vendors and organizations. That makes Dyn an intriguing company to watch in the years to come.

Traffic between a U.K. nuclear regulatory entity and a U.S. research site being routed through Ukraine. (Image: Dyn)